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The new UK Consumer Rights Act – the changing face of collective actions for competition damages in Europe

On March 26, 2015, Royal Assent was given to the United Kingdom’s Consumer Rights Act 2015 (Consumer Rights Act), which is scheduled to come into force Oct. 1, 2015. The Act amends the UK's Competition Act 1998 (Competition Act) by making it easier for individuals and organizations to bring collective actions for breaches of UK or EU competition law. The amended Competition Act will allow opt-out actions and settlements for the first time, and widens the scope of permitted class representatives. Overall, the amendments brought about by the Consumer Rights Act appear to be an effort to entrench the UK’s place as the premier EU jurisdiction for competition class actions.1

Opt-Out Actions and Settlements

Perhaps the most significant reform that the Consumer Rights Act introduces is that the UK Competition Appeals Tribunal (CAT) may consider collective competition claims on an opt-out basis (rather than solely on an opt-in basis, as in the past).

Under the new regime, claimants do not need to specify whether they are initiating an opt-in or opt-out claim. Instead, the CAT has the discretion to hold a case management conference to determine whether the collective proceeding will be on an opt-in or opt-out basis. Under section 47B(5) of the amended Competition Act, if the CAT finds a collective proceeding claim is suitable, it will issue a document called a “collective proceedings order,” which will state whether the relevant collective proceedings will be opt-in or opt-out. In reaching its decision, the CAT must “take into account all matters it thinks fit,” as well as considering the strength of the claims, the practicability of opt-in proceedings in the particular matter, and the damages it estimates individual class members may recover if successful.2

The Consumer Rights Act also introduces procedures for approving opt-out settlements. In section 49A, the amended Competition Act states that to approve a collective settlement, the CAT must confirm that the proceedings: (1) were commenced as a collective proceeding; (2) were certified by the CAT as an opt-out proceeding; and (3) that the terms of the collective settlement are fair and reasonable.

The CAT has also published draft procedural rules for collective proceedings and collective settlements before the CAT (“CAT Draft Rules”) to supplement the CAT’s procedural law in light of the amendments. Rule 93(7) of the CAT Draft Rules provides additional factors the CAT must consider in determining whether a proposed settlement is fair and reasonable.

Representatives

The Consumer Rights Act broadens the scope of potential class representatives, enabling individual class members or other representatives to bring collective actions. However, to represent a class, the CAT must consider that it is just and reasonable for that person to act as a representative in those proceedings. The authorized representatives will then be named in the collective proceedings order.

Claims that May be Brought Collectively

Section 47B of the amended Competition Act allows the CAT to certify claims for collective actions if it finds they are suitable to be brought as collective proceedings. In making this determination, the CAT will need to be satisfied that the claims seeking to be incorporated raise, “the same, similar or related issues of fact or law.”3

Analysis

The potential to bring opt-out collective proceedings should make bringing private action competition claims before the CAT easier for claimants. As it stands, the majority of private actions for breaches of competition law are brought in the UK, with Germany and the Netherlands following next in line. It remains to be seen whether the UK will be able to maintain its lead on the rest of Europe after region-wide implementation (by Dec. 27, 2016) of the EU Damages Directive (Directive) of Dec. 26, 2014. There is growing speculation that the Dutch legislature will present a bill sometime in 2015 enacting the EU Damages Directive and introducing new rules governing collective actions. Further, how the UK and other key EU jurisdictions address the Directive’s approach to disclosure, particularly disclosure of leniency documents, will have a direct bearing on how successful efforts to encourage private actions will be in practice. Nevertheless, the reforms introduced by the Consumer Rights Act clearly indicate a renewed focus on competition law claims in the UK.

The private action-friendly provisions of both the Consumer Rights Act and the EU Damages Directive have raised both hopes and fears about the potential for a dramatic increase in the number of follow-on damages claims in competition law cases. While regulators are generally in favor of increasing the number of private actions brought under the competition laws, many commentators have expressed concern that the opt-out mechanism could nurture a more litigious culture. There is also growing unease that this would significantly heighten the financial exposure of businesses accused of anti-competitive conduct. So far, this flood of claims has yet to arrive, but time will tell whether the amendments to the Competition Act will result in a significant increase in collective damages actions in the UK.

Madeleine Gorman, an Articling Canadian Trainee Solicitor, is co-author of this article.

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